Xi Jinping Replaces as Head of Chinese Communist Party

Xi Jinping replaced Hu Jintao as head of the Chinese Communist Party, ushering in the fifth generation of leaders set to run the world’s second-biggest economy over the next decade. Photographer: Tomohiro Ohsumi/Bloomberg

Nov. 15 (Bloomberg) -- Xi Jinping replaced Hu Jintao as
head of the Chinese Communist Party and the nation’s military,
ushering in the fifth generation of leaders who are set to take
control of the world’s second-biggest economy.

Xi, 59, succeeds Hu as general secretary of the 82 million-member party that has run China since 1949, the official Xinhua
News Agency announced. He’s joined on the elite Politburo
Standing Committee by Li Keqiang, 57, who is forecast to replace
Premier Wen Jiabao at a March meeting. The Standing Committee
has seven members, down from nine.

Xi’s immediate assumption of the military leadership,
unlike his two predecessors, and the decision to cut the
Standing Committee to seven from nine leave fewer voices to
obstruct consensus and may help him consolidate control. Those
moves may also speed up decisions on challenges ranging from an
economic revamp and shrinking the nation’s wealth gap to a
strengthened campaign against corruption and managing
territorial disputes with Japan.

“The Chinese goverment may want to send a message to both
China’s domestic and international audience that the newly
emerging leader will be strong and solid,” said Lee Dongmin, an
assistant professor at the S. Rajaratnam School of International
Studies in Singapore. “Since Xi Jinping now will get to control
both the party and the military, this may be the sign of a new
era.”

Enormous Responsibility

Introducing his fellow Standing Committee members at a
ceremony in Beijing’s Great Hall of the People, Xi pledged to
“carry out reform and opening up” of the economy and said
taking leadership of China places “an enormous responsibility
on our shoulders.”

“Our party faces many severe challenges, and there are
also many pressing problems within the party that need to be
resolved, particularly corruption, being divorced from the
people, going through formalities and bureaucratism caused by
some Party officials,” Xi said.

Xi and Li are joined on the Standing Committee by Vice
Premier Zhang Dejiang, who turns 66 this month; Shanghai
Communist Party Secretary Yu Zhengsheng, 67; propaganda minister
Liu Yunshan, 65; Vice Premier Wang Qishan, 64; and Tianjin party
chief Zhang Gaoli, who turns 66 this month, Xinhua announced.
Wang was also named head of the party’s anti-corruption panel.

Standing Committee members typically retire after age 70.
That means only Xi and Li may remain on the Standing Committee
from the current group after the party’s next congress, in 2017.

All Men

The members of the new panel announced today are all men.
There has never been a woman on the Standing Committee in the
history of the People’s Republic. The number of women on the 25-member Politburo rose to two from one, the most ever.

In another change, Li Keqiang was made No. 2 in the party
hierarchy. Wen, the man he’ll replace as premier, was one place
lower. That’s a relic from 1997, when Li Peng held onto the
second spot as he shifted from premier to chairman of the
national legislature.

Hu’s decision to step down from the Central Military
Commission contrasts with the last transition when he waited two
years to take that post from his predecessor, Jiang Zemin. Xi is
due to take the ceremonial post of state president in March.

The new leadership will have to balance calls by private
entrepreneurs and some political leaders for market-opening
reforms with the interests of state-owned monopolies and local
governments that prospered in the past decade under Hu. Standard
Chartered Plc sees a risk of annual growth slumping to between 3
percent and 4 percent within 10 to 15 years without market-driven change to increase competition for state enterprises.

Debt Surge

Zhang Dejiang, who oversees state-owned companies as vice
premier, is an economics graduate of Kim Il Sung University in
North Korea. Zhang Gaoli presided over a surge in debt-fueled
growth in Tianjin, a municipality almost twice the size of
Delaware.

Liu oversaw media controls and Yu is an engineer whose time
in Beijing was spent in the construction ministry. Wang
currently oversees finance as vice premier and is Treasury
Secretary Timothy F. Geithner’s counterpart in annual bilateral
economic talks with the U.S.

“It appears that this new Standing Committee is filled
with centrist politicians who will continue to push forward
reform at a steady pace, but are pragmatic enough to understand
their constraints,” said Liu Li-Gang, China economist with
Australia & New Zealand Banking Group Ltd. in Hong Kong. “It is
difficult to imagine any bold policy measures will be
implemented soon.”

Hu’s Tenure

During Hu’s tenure as general secretary, the yuan
appreciated 33 percent against the U.S. dollar. The yuan
appreciated even more in real terms, because the inflation rate
in China exceeded that in the U.S. The yuan closed yesterday at
a 19-year high in Shanghai trading, gaining 0.02 percent to
6.2252 per dollar, according to the China Foreign Exchange Trade
System.

Xi may have to contend with pressure from U.S. lawmakers,
some of whom say the Chinese currency is too weak and have
called for duties to be added to Chinese imports. The Treasury
Department’s latest report on exchange-rate policies, issued May
25, said China had made progress in allowing the yuan to
appreciate, particularly since June 2010, when the nation moved
away from a fixed peg to the dollar. The yuan is still
“significantly undervalued,” the report said.

Stock Valuations

Under Hu, Chinese stock valuations fell more than in any
other of the so-called BRICs nations, Brazil, Russia and India.
The Shanghai Composite Index has fallen 19.3 percent in the past
year. It was down 1.1 percent to 2032.23 at 2:43 p.m. local
time.

The incoming Standing Committee also inherits a troubled
relationship with Japan over islands in the East China Sea
claimed by both sides. Japanese Prime Minister Yoshihiko Noda
plans to dissolve parliament tomorrow, triggering elections that
polls indicate will be won by former Prime Minister Shinzo Abe,
who advocates a tougher stance in the territorial dispute.

There are signs that Xi will be a different leader -- at
least in style -- than Hu, who stood stiffly in a 2009 photo of
Group of 20 participants in London while U.S. President Barack
Obama and former Italian Prime Minister Silvio Berlusconi
laughed and chatted.

During a June 2010 visit to Australia, Xi took a river
cruise through Kakadu National Park. When the boat stopped near
a crocodile sunning itself on the shore, Xi posed for pictures
with the Chinese delegation, including junior officials, with
the reptile in the background, said Geoff Raby, Australia’s
ambassador to China at the time.

Muscatine Visit

Earlier this year, Xi made a trip to the U.S., meeting
Obama in Washington and returning to Iowa where he first visited
in 1985 to learn about agricultural techniques. During his visit
to Muscatine, a Mississippi River town, he recalled how
residents then were surprised he watched American movies such as
“The Godfather.”

“He’s going to be instinctively a better communicator and
politician in terms of reading public mood and creating a more
approachable public persona,” said Kerry Brown, a professor at
the University of Sydney, who previously served as a British
diplomat in Beijing. “As a leader, Hu Jintao’s been very remote
and this is the cause of many problems.”

Political Scandal

The party’s larger, 25-member Politburo, includes Zhang
Chunxian, the party secretary for Xinjiang, where China’s
government is cracking down on unrest by some members of the
region’s ethnic Uighur minority; Wang Huning, a former dean of
the law school at Shanghai’s Fudan University and head of the
party’s Central Policy Research Center; and Zhao Leji, the party
secretary for northwestern China’s Shaanxi province.

The leadership transition has been roiled by China’s
biggest political scandal in a generation, with the ouster of
Chongqing party boss Bo Xilai from the Politburo in April. Bo’s
wife was convicted in August for the murder of a British
businessman, and Bo, once a contender for the Standing
Committee, was expelled from the party. He now faces trial for
corruption and abuse of power.

In his Nov. 8 address to open the Party Congress, Hu said
that failure to address corruption “could prove fatal to the
party, and even cause the collapse of the party and the fall of
the state.”

A key challenge for Xi and his Standing Committee
colleagues will be to ensure that Communist China doesn’t follow
the pattern of the Soviet Union, which ossified into an
unyielding organization riven with vested interests that blocked
any change, said David Zweig, a professor of political science
at Hong Kong University of Science and Technology.

A Soviet-style sclerosis in the country’s leadership “will
make it very difficult for him to solve China’s numerous
problems and could significantly intensify the party’s own
problems,” Zweig said.